Michum Inc. has related parties with a company owned by the CEO's brother that comprise about $500 000. There are also related party transactions with the owner (about $250) and with two of the officers ($750 and $1000) respectively. Which related parties should be identified and included in audit documentation?
A) those with material transactions only
B) those that had transactions in the current year only
C) all related parties
D) only those that could lead to a conflict of interest

Question

Quizplus · Accepted Answer

According to auditing standards, all related party transactions should be identified and included in audit documentation regardless of their materiality or timing. This includes transactions with the CEO's brother, the owner, and the two officers. The purpose of identifying and disclosing related party transactions is to provide users of the financial statements with information about the potential influence of these parties on the company's financial performance and position. Therefore, option C is the correct choice.